Monday, June 26, 2006

Nuclear Family implodes as condo crowd grows

SAN FRANCISCO -- The Nuclear Family is so 1950s. Jetsons-style high-rise condo buildings are now rising in and around major metro areas, and the buyers of these modern abodes are not the Bradys and the Cleavers.The number of non-family households has risen steadily since the 1940s, and condo developers seek to capitalize on the new demographic of buyers -- which includes singles, single parents, young professional couples, baby boomers, empty nesters -- by stacking lots of units in once-forbidding urban areas that are reviving with an influx of new residents, entertainment venues and eateries."Be prepared to market to a large variety of buyer segments," said Patrick Duffy, managing director of Hanley Wood Market Intelligence in Costa Mesa, Calif. Duffy, who spoke Thursday during a presentation titled "Who's Buying High-Rise Condos?" at PCBC, a builder's conference held at San Francisco's Moscone Center, also noted that high-rise condo developers must pay close attention to design, costs, liability and risk, and upgraded services such as concierges. Buyers of luxury condo units can have high service expectations, he said, which makes property management a "critical" property attribute.A Hanley Wood study of 54 high-rise condo projects in California revealed that units were mostly popular with childless professional couples and singles, with some interest from empty nesters and far less interest from young families. Also, high-density housing has been increasing across the country. In 1990, residential development with 20 or more units accounted for about 8.1 percent of the U.S. housing stock, 10.7 percent of California's housing stock, 19.7 percent of the housing stock in San Francisco County, 11.2 percent of the housing stock in Orange County, and 12.7 percent of San Diego County's housing stock.By 2000, the share of residential developments with 20 or more units had risen to 8.6 percent nationwide, 12 percent in California, 22.9 percent in San Francisco County, 13.2 percent in Orange County and 14 percent in San Diego County.Duffy noted that while high-rise condo projects tend to be located in major cities, the suburban periphery is an emerging market for the projects. "It will be interesting to see as this market sort of changes if that's going to continue or not," he said.Matt Montgomery, director of real estate development with Opus West Corp., a commercial builder that got into high-rise residential construction about six years ago, said people sometimes ask about the profile of buyers for a high-rise condo project the company is building in Orange County."It's a layered answer," he said, because there are many price points for the units within the tower. "To say we have one buyer demographic within that whole price range is a little unfair." It's easier to divide the building into three or four segments to explain the demographics of buyers, he said. There are the first-time buyers for the low-end units, followed by empty nesters who are downsizing and seeking a lifestyle change. There is also a large demographic of single women, he said. And then there are the people who want to entertain, who are loaded with money and prefer the large penthouse units.The company approached the project as if it were a four-star or five-star hotel, Montgomery said. Rising land values "are just astronomical today" and present some obstacles for developers, he said, to the point that some other high-rise condo projects proposed in Orange County may end up as commercial buildings as opposed to residential projects because of the high costs related to residential projects. "There is so much risk and liability for these things," he said. Parking is a huge factor for high-rise projects, too, and "can pretty much make or break a deal," he said.In designing the Orange County towers project, Montgomery said the company looked to a "forward-thinking design" that also had contemporary elements to appeal to older buyers.Greg Currens, CEO for Style Interior Design, an interior design firm that specializes in multifamily and master-planned communities, shared photographs of a group of mostly young people waiting in line to purchase pre-construction high-rise units in a new project in Southern California. Large projection screens displayed already purchased units in gray, and still-available units in white. Like a bingo card, the gray areas grew during the day as pre-qualified buyers selected units to purchase. The photos told a story of the frenzied sales atmosphere that has accompanied the condo market in some regions of the country."If you leave that room, you lose your place in line. There is a real sense of motivation -- a sense you've got to make a decision and make that decision now," Currens said. One of the photographs showed a young woman in tears, presumably because the unit she hoped to purchase was already sold.Image and personalized service means a lot to high-rise condo buyers, said Donnie Disbro, vice president for Professional Community Management, a property management company based in Lake Forest, Calif. "The little things matter -- how concierges dress, the music in the lobby, they want it all attractive. They'll spend a lot of money for it but they don't' have time for anything less than the best," he said."These buyers have money. They have disposable income. They want professional management. They're comparing the management of their building to a hotel. They want to see the pool guys out there organizing the lounge furniture. They want to see where their dollars are going."***Send tips or a Letter to the Editor to glenn@inman.com or call (510) 658-9252, ext. 137.